Cig tax behind, budget looming ahead

JACKSON -- Gov. Haley Barbour plans to approve the cigarette tax increase the state Legislature passed Wednesday as lawmakers resumed efforts to build a state budget amidst what Barbour calls a "financial storm."

The 50-cent-per-pack increase -- the state''s first cigarette tax hike since 1985 -- is estimated to generate more than $100 million. It will help replenish the state''s depleted car-tag reduction fund and provide additional revenues for the state treasury.

"We need this $100 million and we need to take care of the car-tag issue and we need to reduce smoking in this state," said Rep. Cecil Brown, D-Jackson, a legislative budget leader.

Barbour -- who''s been against cigarette tax increases in previous years and vetoed them -- now embraces the new 68-cent tax as part of his budget plan.

"There are no easy answers and no quick fixes, but there are some common-sense ways to help weather this financial storm," the Republican governor said Wednesday in presenting budget recommendations to the Legislature.

State revenues continue to decline as the recession takes its toll, forcing cuts in state services by as much as $400 million this year and more next year.

Mississippi lawmakers returned Wednesday from a five-week recess to pass the tax bill and resume efforts to hammer out the budget.

Following the Senate''s 40-4 vote, the House approved the bill 102-18 to increase the state''s 18-cent-per-pack cigarette tax to 68 cents. It now goes to Barbour for him to sign into law taking effect May 15.

"Today was a big step," said Rep. Jeff Smith, D-Columbus, who voted to raise the country''s third-lowest state cigarette tax.

However, he noted much remains to be done for the House and Senate to reach a consensus on funding state government for the fiscal year that starts in July.

An overall budget deal could be made if the House and Senate reach an accord on how to fill a $90 million Medicaid deficit. However, "that''s a big ''if''," Smith said.

"It''s going to take (a lot). It''s like a line of dominoes. If one falls over, the others do," he said.

Barbour and the GOP-controlled Senate want to pass a $90 million hospital tax to help fund Medicaid, but the Democratic-led House does not.

In session since January, the Legislature last month delayed adopting the state''s $19 billion budget until more information is available on the federal stimulus funds Mississippi is getting. Legislators want to pass the budget in a few days, but it could take longer.

"We''ve got big hurdles to pass," Smith said.

He noted a multimillion-dollar legal settlement is in the works by state Attorney General Jim Hood that could provide a budget boost.

Hood''s spokeswoman said she couldn''t discuss details of the potential financial windfall from the lawsuit, but she confirmed it could be big.

"We are working fervently at reaching a settlement which could be used to fill the budget gap," said Jan Schaefer, the attorney general''s public information officer

In passing House Bill 364 Wednesday, the Legislature moved to generate an estimated $106 million to $113 million a year in revenues and also relieve car owners from higher taxes. It sends about $27 million to the state''s car-tag reduction fund. That provides discounts to automobile owners on their car tags and reimburses counties for the revenue loss.

A decline in auto sales had forced the state Tax Commission cut back on the reimbursements and shrink the discount.

Sen. Terry Brown, R-Columbus, said the public has voiced great concern about the prospects of car taxes going up. "The people back home don''t care that much about cigarette taxes. They care about car tags," Brown said.

While the bill sends money to the car-tag reduction fund, state lawmakers noted that city and county governments set the tax rates on cars.

"I don''t want to go home to choke down a big tax increase (on cigarettes) and see car tags increase," Brown said.

Brown opposed the bill because of the cigarette tax increase. Rather than raising cigarette taxes, he favors using some of the state''s rainy-day reserves to replenish the car-tag fund.

To read bills, follow their progress and see how legislators voted, go to the Mississippi Legislature''s Web site: billstatus.ls.state.ms.us. The Web site also has live videocasts of House and Senate floor sessions.

Roll Call

House Bill 364 to increase the cigarette tax and preserve car-tag discounts:

SENATE

n Terry Brown, R-Columbus: Against (in a paired vote with an absent senator)